Real Estate Risk Management Practice Test 2025 – Comprehensive Exam Prep

Dual agency occurs when a single licensee represents two or more principals who are negotiating with each other in the same transaction. This situation creates a unique set of dynamics because the licensee must balance the interests of both parties, which can lead to potential conflicts of interest. The licensee is obligated to maintain confidentiality and provide fair treatment to both sides, making it a complex role.

In a transaction where the licensee represents both the buyer and the seller, they must navigate the preferences and goals of each party, while ensuring that neither is put at a disadvantage. This relationship must be disclosed to all parties involved, and both must consent to the dual representation. This is crucial in maintaining transparency and complying with legal and ethical standards in real estate practice.

The other scenarios presented do not inherently involve dual agency. For example, representing family members or agents from different brokerages does not automatically create a dual agency situation unless they are both parties to the same transaction. Similarly, the obligation of referral fees does not set a dual agency condition. The essence of dual agency lies specifically in the negotiation context between the principals in one transaction.